What do the weekend’s election results change for long-term investors? Perhaps less than you think.
Someone starting their first job today could vote in a dozen or more general elections before they retire. Every one of them will have consequences for New Zealand. But how much should any single election change that person’s investment plan?
In my view, the answer starts with perspective.
Markets don’t like uncertainty. An election result, whatever it is, helps reduce it. Businesses and investors get a clearer picture of the rules they’ll be operating under, so they can get on with making decisions.
That clarity doesn’t arrive overnight. Coalition negotiations will shape which proposals go ahead, when, and in what form. But one positive outcome of this campaign is already worth acknowledging, whoever forms the next government.
KiwiSaver took centre stage
Most parties put forward ideas to strengthen New Zealanders’ retirement savings, putting KiwiSaver at the heart of the debate.
The proposals ranged widely: how much employees and employers contribute, whether saving should be compulsory, how contributions are taxed, what support parents receive while on parental leave, and whether children should be enrolled from birth.
We’ll see which of those make it into policy. What encourages me is that the debate has moved on. We’re no longer asking whether KiwiSaver is a good idea; we’re asking how to make it work harder for the people who will depend on it. That’s exactly the conversation a nation of savers should be having.
What history tells us about shares after an election
Historically, New Zealand shares have tended to be fairly subdued in the lead-up to polling day. What happens next is more interesting.
As Milford Wealth Management Adviser Julie Shacklady noted in Bridge talks Business episode 93, the NZX 50 recorded a positive gross return in the six months after each of the seven general elections held between 2005 and 2023. The average was just over 6%, with positive returns following both National-led and Labour-led governments.
Of course, seven elections is a small sample, and those seven give us little basis for predicting the outcome from an eighth. We can’t credit those gains to the elections, nor assume shares will rise this time. What’s happening in the global economy often matters more.
New Zealand shares are only part of the picture
In a diversified Milford fund, New Zealand shares often make up only a small slice of the fund’s overall portfolio. The mix varies from fund to fund, but can include shares in businesses around the world, government and corporate bonds, and exposure to different currencies.
Say your fund holds shares in global technology companies and airlines. Your returns depend in part on what happens to each of those business sectors. For technology companies, the big question may be whether massive spending on AI will generate enough earnings to justify current share prices. For airlines, a sustained rise in oil prices could squeeze profits by pushing up their fuel bills. Both sectors, however, still have to contend with changes in interest rates, inflation and the strength of the economies they serve.
A New Zealand election is one influence among many – and often not the biggest.
When should you change your plan?
A good, diversified investment plan answers that question for you. It starts with three things: your goal, your timeframe and how much risk you’re willing and able to take.
If you’re tempted to make a change after the election, I’d challenge you to ask why. Why wouldn’t you stay with your plan and give it time? A campaign proposal can look very different by the time it takes effect. Once the detail is clear, you can judge whether it genuinely affects you. Even then, the impact on your KiwiSaver account may be marginal.
More important reasons to revisit an investment plan are changes in personal circumstances, such as your goals, investment timeframe, financial position, or ability and willingness to take investment risk. If any of those have changed, it may be worth speaking to a Financial Adviser. If those things remain much the same as they were before polling day, that tells you something too.
A well-constructed long-term investment plan should be designed with periods of political change in mind, rather than around the outcome of a single election.
The bottom line
Elections come and go. A good long-term plan is built to outlast them.
So, it’s worth keeping things in perspective. One election is one influence among many. The policy detail also needs time to become clear before its implications can be properly understood.
Come back to your plan. Your goals, timeframe and appetite for risk should drive your decisions, not the news cycle.
Reacting to headlines is not a strategy. Sticking to a good plan is.
